Pakistan’s first ever 3-year trade policy framework has failed primarily owing to lack of funds for development initiatives provided by it for promotion of exports and capacity building of exporters.
The Strategic Trade Policy Framework (STPF) 2009-12 operative from July 2009 ended on June 30, 2012. Of the Rs35 billion earmarked for the STPF implementation, only around Rs3 billion was disbursed.
Interestingly, the STPF had targeted export at $23.6 billion annually at the end of 3-year period. However, exports crossed $24.5 billion mark one year ahead of the deadline, and with partial implementation of policy.
The last year’s export bonanza was witnessed because of unexpected increase in international cotton prices which boosted textile exports. Now the textile and clothing sector is facing problems with the shrinking the EU and US demand and stiff competition from Bangladesh, China and India.
While the STPF was a good attempt to identify grey areas for policy responses, export development initiatives and direction for government’s role in export promotion, a sound policy could not yield anything for want of implementation.
Under the trade policy, decision-makers generally concentrate on export targets. To achieve the targets, focus is on export promotion of established products. Consequently, the export basket remains narrow. The textile and clothing constitutes 55 per cent of the total exports, showing the painfully slow pace of diversification.
The trade policy instead should be laden with measures to improve efficiency of export- oriented industries.
As many as 70-80 per cent of initiatives announced in the trade policy are never implemented because of human resource problem in the ministry of commerce. The Trade Development Authority of Pakistan (TDAP) is the implementing arm for trade initiatives, located in the extreme south of the country. Most officers in the MoC are from the north and do not want to be posted in the south. So competent officers avoid posting in the TDAP and instead serve in other offices on deputation.
There is a need to transfer officers in the TDAP to regions on the basis of products manufactured there. For example, those posted in Sialkot would exclusively look after exports of sports and surgical goods. Reshuffling should be product- specific.
Exports also suffer due to lack of coordination among different government agencies on implementation of trade policy.
Some believe that the funding issue related to export development initiatives to a large extent can be resolved through transfer of export development surcharge (EDS) to the commerce ministry. The EDS is levied on all exports at the rate of 0.25 per cent of fob value of goods. As per law, entire receipts of the EDS should be transferred to export development fund (EDF) in the following year. The finance ministry has withheld the EDS amount of Rs8 billion from export proceeds since 2006-07 till today.
Global food trade stands at more than $361 billion, but Pakistan’s share in it is negligible. This is because Pakistan lacks recognised standard agricultural practices. The setting up of supply chains of certain products including cool chains has been held up for want of funds for the past three years.
The STPF did have a plan for establishment of Pakistan Good Agricultural Practices (PAKGAP). Unfortunately, these standards were yet to be enforced.
The domestic compliance to international standards is crucial for export of food products like citrus, mango, dates, potato and onion to developed markets.
The trade policy document does not focus on domestic commerce and promotion of cottage industry. There is hardly any initiative for the promotion of inter-provincial trade..
The development initiatives are designed to support the established sectors like textile, clothing, leather etc. at the cost of new products that could diversify exports.